The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

William Hague's European Policy

Paper No. 40

Dr Martin Holmes

Introduction

Ever since Mrs Thatcher delivered her controversial Bruges Speech in September 1988 it has become a familiar axiom of British politics that the Conservative party is fundamentally divided over Europe. Changes of leadership and policy have witnessed only deeper divisions as the party has become more divided than at any time since the appeasement battles of the 1930s or even the Corn Laws repeal catharsis of the 1840s. John Major's equivocation and attempt to compromise was no more able to unite the party than Mrs Thatcher's "No! No! No!"; and as William Hague has already discovered, his eurosceptical policy stance has transformed the former Euroenthusiast loyalists into eloquent rebels who are as deaf to pleas for unity as were the whipless Westminster Eight in the last Parliament.

However, it may be argued that although Mr Hague has been unable to contrive a genuine party unity his sceptical policy on Europe commands greater assent within the party by working with, rather than against, the grain of opinion both within the parliamentary party and at constituency level. Mr Hague's approach - to European integration in general and the single currency in particular - may enhance his leadership in contrast to John Major's collapse of authority and alienation from the party's Eurosceptical mainstream. Considerable evidence of events since May 1 1997 points clearly in this direction.

Overall European Policy

Before assessing William Hague's policy changes it is necessary to categorise John Major's overall approach to European integration.1 Mr Major's term in office can be divided into three distinct parts. Firstly between November1990 when he became party leader, and the General Election in April 1992, Major pursued a policy of compromise in order to hold his party together as the question of Europe threatened to split it apart. The second period was that of Euroenthusiasm, between the victory in the April 1992 election and September 1993, which was characterised by Major's support for the ERM and by the passage through the House of Commons of the Maastricht Treaty.

In the third period, from September 1993 up to and including the 1997 General Election, Major reverted to the policy of compromise. During compromise Mark II the issue of Europe became a function of party management, as Major endeavoured to preserve a fragile semblance of party unity. Ultimately Major's European policy contributed mightily to his election defeat. Not surprisingly the pursuit of a different policy on Europe was a top priority for Mr Major's successor as party leader.

Since his election as leader Mr Hague has pledged his opposition to the Amsterdam Treaty to the point of imposing a three-line-whip against it. Surprisingly, in view of the dissatisfaction of the eurointegrationists, only one MP, Edward Heath, defied the party whip by abstaining. Mr Hague even called for a referendum on Amsterdam and advocated a "No" vote in the admittedly unlikely event of it being held. Moreover, he stood as the eurosceptical candidate in the final Conservative leadership ballot against Kenneth Clarke's celebrated euroenthusiasm; subsequently he has publicly repudiated Mr Clarke, Michael Heseltine, and others who have criticised his European policy, pointedly refusing to be swayed by "former cabinet ministers".

Recalling how Keith Joseph had apologised in opposition for the errors of the Heath government. Mr Hague apologised for the ERM fiasco in his first speech as leader to the Conservative Conference. In stark contrast to the behaviour of his predecessor who viewed the crisis of September 1992 as either bad luck or mismanagement by the Bundesbank. Mr Hague has appointed known eurosceptics to his shadow cabinet who were either frozen out under Major (Iain Duncan Smith) or who resigned in agonised principled opposition to Major's policy (David Heathcote-Amory). When euroenthusiasts David Curry and Ian Taylor resigned from the front bench Mr Hague made no serious effort to dissuade them and used the opportunity to demonstrate the strength of his leadership. The Tory leader, campaigning in the Paisley by-election, said he would prefer them to go: "It is better to resign if they have a genuine disagreement with the party than if we tried to cover it up. I would rather people resigned so that we have a have a united team and so that we can get a clear message across to the country".2 Moreover the portfolio distribution within the shadow cabinet initially rewarded the eurosceptics with Peter Lilley (Shadow Chancellor), John Redwood (Trade and Industry) and Michael Howard (Shadow Foreign Secretary) holding influential and senior positions. Mr Redwood having returned to the backbenches in 1995 prior to challenging Mr Major for the Conservative leadership, is no stranger to taking a strong eurosceptical line. But Mr Lilley and Mr Howard, free from the shackles of collective cabinet responsibility which prevented them from speaking out, spoke of little else between 1997-99 than their hostility to further European centralisation. Further re-shuffles in 1999 consolidated the eurosceptic flavour of the opposition front bench notably with the promotion of Howard Flight and John Bercow, while the February 2000 reshuffle promoted Michael Portillo to shadow chancellor and moved Francis Maude to Foreign Affairs replacing the ineffectual euroenthusiast John Maples. Although John Redwood was also a reshuffle casualty the overall balance of the shadow cabinet was decidedly eurosceptic given Mr Portillo's long history of opposition to EU integration; it was Mr Portillo, after all, who compared John Major to the Colonel played by Alec Guinness in the film Bridge Over the River Qwai on the basis that the bridge served Japanese interests while the Maastricht Treaty served continental interests. One might add that the analogy breaks down because the Colonel, realising his error, redeemed himself by self-sacrifice while John Major has never recognised the folly of the Maastricht Treaty.

Aside from shadow cabinet personnel Mr Hague's policy pronouncements on Europe have all been noticeably sceptical. In May 1998 he told the Insead business school at Fontainebleau that:

"There is a limit to European political integration. We are near that limit now. I intend to make three arguments. The first is economic. The European policies that were a natural response to the problem of post-war reconstruction are not necessarily appropriate for the future. In place of the ideas of intervention and regulation we need to create a free and flexible Europe. My second argument is strategic. The fall of the Berlin Wall has completely changed the challenge facing European states. Bringing prosperity and stability to newly freed states is now the most urgent of Europe's tasks. And the third argument is political. Push political integration too far and accountability and democracy become impossible to sustain."3

Rejecting the charge that he was anti-European or nationalistic he criticised the EU from an internationalist perspective reminiscent of Mrs Thatcher's 1988 Bruges speech. To Mr Hague:

"It is not the critics of the current direction of European Union who are isolationist, out of date or even anti-European. Rather it is the EU's direction which is in danger of becoming isolationist. It is its post-war assumptions that are increasingly out of date. And it is the danger of integration and the abandonment of our continent's diversity and pluralism that is anti-European. True internationalism is about the relationship between states rather than their integration into a single state; the nation state is not an outmoded concept, but is the best vessel for true democracy. The task for our generation is to persuade the European Union that it has to stop addressing the problems of the 1940s with solutions devised in the 1950s, and start facing up to the challenges of the new century. To the post-war generation the success of corporatist and interventionist economics was barely contested. Interventionism was at the heart of Monnet's vision and has led the drive towards political integration throughout the EU's history. But for some reason the failure of interventionism in the West and the spectacular collapse of Communism in the East does not seem to have dented the EU's faith in the power of the state. There is still great confidence for example in the efficacy of government intervention and the ability to provide social protection through labour market regulations. These are old economic solutions and they are not right for new economic circumstances. For we now live in a world of opportunities unimaginable even a generation ago."4

A year later, on May 2 1999, he told Conservative candidates in the June10 European Parliamentary elections that "...we believe there should be limits to European integration and that we are near those limits now".5 Under the omnipresent and all-purpose slogan Britain in Europe, not run by Europe, Mr Hague's theme was hostile both to the EU Commission and to the Blair government's ineffective attempts to reform the EU:

"The British people believe that Britain's place lies firmly within the European Union, but that we should work to make it the right kind of European Union. This should be a European Union which does less but does it better, not an EU run by a 'cling-on Commission' which has defied democracy and ignored accountability. The lead taken by Conservative MEPs in highlighting the mismanagement of the Commission was crucial to its resignation in March. Back then we were promised by Tony Blair that this would be an opportunity for Brussels to put its house in order. But what has happened since? Today, these same Commissioners are still at their desks - including those implicated directly by the independent report into maladministration.

"They have been allowed to cling onto power in a caretaker capacity. Worse, they are taking decisions which will have a profound impact on all of our lives. They have proposed a new Social Chapter law on fixed-term contracts, they floated plans to end Britain's reduced rate of VAT on art imports, they have even adopted a draft EU budget for the year 2000. All of this after Jacques Santer promised the European Parliament that no new policy initiatives would be taken until a new Commission was appointed. That Commission should be made up of entirely new faces when it takes office next year. In the meantime, Romano Prodi should talk less about European governments and European armies and spend more time making sure his caretaker commissioners stick to the basics."6

A similar line was apparent in Mr Hague's Budapest speech just a day later. Relishing the theme of enlargement to assist the new democracies of central Europe, which Mrs Thatcher had also conspicuously championed, the Conservative leader suggested that a new Treaty provision could allow countries not to participate in fresh legislative action at an EU level which they preferred to handle at national level. The Amsterdam Treaty was a particular target.

"At the beginning of this month, the Amsterdam Treaty came into force. It was meant to be the treaty for enlargement. Faced with the need to make practical changes to their institution and structures, Europe's leaders balked at it. What emerged from Amsterdam is a blueprint for a deeper not wider Europe. None of the necessary reforms has been tackled: neither the liberalisation of agricultural policy, nor the decentralisation of power, nor even the practical., precise institutional changes needed for enlargement to happen. Far from preparing for expansion, the EU is going down precisely the opposite path, taking yet more powers from nation states to the centre."7

As far as practical policies were concerned Mr Hague cited the EU pleas for tax harmonisation as eroding the basis of national democratic decision making:

"Tax harmonisation is another example of Europe heading in the wrong direction. Commissioner de Silguy says that "for integrated financial markets to work we must harmonise taxes." I reject the whole idea of tax harmonisation. After eighteen years of Conservative government, taxes in Britain became the lowest of any major European country. Tim Congdon's excellent study published this month by the think-tank Politeia shows that in Britain taxes could have to rise by as much as a fifth to bring them into line with the rest of the EU. The current head of the German Bundesbank has said that "a European currency will lead to member nations transferring their sovereignty over financial and wage policy as well as in monetary affairs. It is an illusion to think that states can hold on to their autonomy". Lose the power to tax and spend, and I believe you lose one of the most important things that makes you an independent nation."8

Following the Conservatives' success in the European parliamentary elections - albeit on a 23% record low turnout - Mr Hague regarded his European policy as having been vindicated.9 Thus he confidently told the Congress of Democracy conference, hosted by MP Michael Spicer, that the most significant change over the past year had been the election result:

"Thanks to the Conservative Party the British people have had their first chance to express their opinion at the ballot box. I say 'thanks to the Conservative Party' because if Labour and Liberal politicians had their way then the European elections would have had nothing to do with European issues or the single currency. Labour's tactic was to pretend the European elections were not actually taking place, but the only person they managed to fool was their own campaign coordinator, Margaret Beckett, who directed operations from her battle-caravan in France. The Liberals tried another tactic and talked about anything and everything that had nothing to do with Europe. They were so successful that they lost every one of their English Westminster seats. We made sure that the European elections were about Europe. And the British people made sure that they sent a clear message to the government that they want to be in Europe but not run by Europe and that they want to keep the pound."10

At the 1999 Conservative party conference Mr Hague again reiterated his support for EU membership while promising that a Conservative administration would ensure that any EU treaty "...must contain a flexibility clause or else I tell you there will be no treaty."11 Elaborating on this theme a week later in The Times he stated that "...to create that flexible and enlarged EU, we propose a new European treaty provision which would allow countries not to participate in new European legislation which they wanted to handle at national level, excluding the ... single market and an open free-trading competitive Europe."12 But such a legal innovation was not, according to the then shadow foreign secretary, John Maples, a mandate to renegotiate existing treaties,13 which is exactly what many Conservative eurosceptics have most recently urged.

Moreover Mr Hague's policy certainly appeared to provide an appropriate response to the federalist push of the new EU commission president, Romano Prodi, who since April 1999, has advocated political union to counter-balance monetary union, envisaged integration on a level not seen since the Roman Empire, and suggested enlargement to the East as a pretext for greater qualified majority voting and an end to the national veto.

Thus by the end of 1999 Mr Hague had established the most eurosceptical policy since 1990, ironically aligning the Conservative party with the profound distrust of further European integration which precipitated Mrs Thatcher's downfall two years after the 1988 Bruges Speech. In so doing Mr Hague has broken with the policy of the Major years especially in his willingness to reject outright the Amsterdam Treaty. Mr Hague has thus overturned the precedent of previous Conservative approval for the Treaty of Rome, the Single European Act, and the Maastricht Treaty of European Union.

In short, the style, substance and personnel of European policy have been radically altered by Mr Hague although without a reduction in the intensity of dispute within the party. Indeed the emergence of the Mainstream organisation of pro-integrationists in November 1997 indicates the continuing susceptibility of "party-within-a-party" political factions. Thus William Hague's overall policy of euroscepticism has formed a recognisable framework in which to assess the more specific issue of Economic and Monetary Union.

Single Currency Policy

Although Mr Hague's policy on the future of the pound has endured its own periods of uncertainty and lack of clarity, there is no doubt that the new leader has unequivocally ditched Mr Major's 'wait and see' (or 'negotiate and decide') approach. To argue that Mr Major's policy caused confusion is an understatement. The prime minister obstinately refused to consider the question of the single European currency in the constitutional terms which the eurosceptics urged. He refused to consider it as an issue with profound political as well as economic implications. He stuck to the view that there would be circumstances in which the single European currency would be beneficial to Britain if the convergence criteria were met. And it was with begrudged reluctance that he conceded that in the event of his government recommending that course of action there would have to be a referendum of the British people.

It is to Mr Hague's credit that he moved swiftly to jettison such a legacy. Instead of wait and see Mr Hague has ruled out the single currency for this parliament and the next, equivalent to ten years. Although this appproach was first suggested during the party leadership campaign, he somewhat diluted it before the 1997 Conservative party conference to a policy of ruling out EMU "for the forseeable future". This change of tactic was only temporary and the original hardline policy was reinstated as a result of strong pressure from the backbenches and from within the shadow cabinet. The resulting resignations of two front bench spokesmen, and the withdrawal of the whip from Peter Temple-Morris, strengthened Mr Hague's leadership position. It is unlikely that the policy will be changed again, except possibly in an even more eurosceptical direction. Thus Mr Hague's 1997 post-Conservative conference policy was trenchantly expressed as follows:

"I say no to a single currency in the lifetime of this Parliament. And what's more I intend to say no to a single currency at the next election, subject to the democratic approval of members of my party. The economic dangers are just too great. If we adopt the same currency as France or Italy or Spain, where unemployment is much higher, and competitiveness is much lower, then we risk an economic catastrophe. Remember Black Wednesday, when we crashed out of the ERM? At least then we could leave the system. With a single currency there are no exits. And there are fundamental constitutional questions to be asked too. For example, would a single currency require decisions on tax levels and government spending to be decided in Brussels and lead to a United States of Europe, as many people think? These questions have to be answered."14

Similarly, Mr Hague told the November 1997 CBI Conference that "... unlike the ERM, the single currency exists for all time. British business could find itself trapped in a burning building with no exits", and adding that "...if the nightmare of our experience in the ERM teaches us anything it is not to steer by the siren voices of a supposed consensus, but to exercise the independent judgement of a cool head". The prolonged ovation he received from CBI members may indicate that the pro-EMU views of the CBI leadership are not as representative of British industry as is often claimed. Mr Hague can also take heart from the more sceptical stance on EMU of the Institute of Directors, the British Management Data Foundation, the Federation of Small Businesses, and individual branches of the Institute of Export.

After the overwhelming ballot of Conservative party members to support his policy Mr Hague has reiterated his backing for the pound. In his May 1998 Fontainebleau speech he attacked the harmonisation of taxes implicit in monetary union, returning to the same threat during the 1999 European parliamentary election campaign:

"Conservatives recognise joining the single currency would involve huge risks for Britain. We believe that the sixth largest economy in the world can make a success of its own currency if it wishes to do so. That is why we oppose the Labour and Liberal Democrat policy of trying to bounce Britain into scrapping the pound by stealth, regardless of the economic and political consequences.

"Conservatives believe that high taxes destroy enterprise, that red tape destroys jobs, that high spending and state intervention undermine freedom. That is why we oppose the direction which Europe is now heading in, with high taxes and high spending, and more red tape and intervention. The left is taking us in that direction because for the first time in Europe, both the Council of Ministers and the European Parliament are in the hands of left wing politicians."15

Similarly he told his Budapest audience that "... I believe it is common sense to see the euro working in good times and in bad before we even consider abolishing the pound. That is why the Conservative party will oppose joining the euro at the next election".16 In July 1999 Mr Hague identified no fewer than eight reasons to keep the pound, prominent among them being:

"...keeping the pound means we can run the British economy in the interests of British business and British jobs. Monetary sovereignty, like any other sovereignty, is not the ability to do whatever you want; but it is the ability to make your own choices. With our own currency, interest rates can be set specifically for our own economic conditions, to reflect the supply and demand for credit in this country. That is a huge advantage for any country, but particularly in Britain where the large number of home owners with mortgages makes our economy particularly sensitive to changes in interest rates. Having the freedom to adjust Britain's interest rates relative to the rest of the world can help us offset temporary economic imbalances in a reasonably benign way. Depriving ourselves of that policy tool would force us to rely on drastic and destabilising adjustments to budgetary policy. The alternatives are inflation or unemployment."17

In November 1999 he told the CBI annual conference that the euro was one the EU's "daft ideas", adding with much justification that "... in the age of the multinational company and the increasingly borderless trading across the world, particularly in electronic commerce, nation states must develop competitive advantage. The last thing you want to do is to harmonise taxes with other countries and adopt the rules and regulations of other countries".18

Mr Hague's approach has been given added validity by the decision of Chancellor Gordon Brown, on behalf of Her Majesty's government, to rule out British membership of the single currency for the duration of this parliament. Thus both government and opposition ruled out the Stage III membership in1999, a decision which eluded John Major. The difficulty for Mr Hague is that the Blair government has expressed its willingness to join EMU eventually in the belief that there are no insuperable constitutional barriers. To be sure Mr Brown appears to have cooled towards the euro in the light of its economic under-performance and the unattainability of the celebrated five economic tests. Meanwhile Robin Cook has warmed towards the euro citing its initial acceptance as a proof of its credibility.19 But neither Blair, Brown nor Cook have any political objection to the principle of embracing a single currency with its one-size-fits-all interest rate.

Of course many Conservatives would like a commitment to exclude the single currency permanently on constitutional grounds of parliamentary sovereignty. So far Mr Hague has not given this undertaking preferring to construct a party coalition of principled eurosceptic opponents with those opposed pragmatically to membership within ten years. Events may force a rethink of this aspect of policy before the next election especially as divisions over Europe within the party are as much about politics as economics. The Conservatives are also vulnerable to labour accusations of avoiding the questions of principle which Gordon Brown favourably addressed. Peter Mandelson had thus taunted that:

"Many in the Tory party clearly subscribe to the view that a single currency would mean - as Michael Portillo once put it - "giving up the government of the UK" and thus cannot be contemplated. William Hague himself was once in this camp, saying at his leadership campaign launch "I am against a single currency in principle. We should not be part of a single currency". Peter Lilley, the shadow chancellor, clearly shares those views, since he told the Commons that "we cannot accept that it is right to sign up in principle to a single currency". The logical conclusion of this view is clearly to rule out membership of the single currency for ever, since any economic advantage Britain might gain is not relevant. It is, I believe, the wrong view to take, but it is perfectly intellectually coherent.

"... The shadow cabinet, however, by refusing to resolve the issue of principle will not even be able to engage. It has chosen a policy that reflects the views of none of them but tries to reconcile the views of them all. That was a recipe for disaster for the Conservatives in government. It will be no different for them in opposition as events show."20

If such a line of argument becomes more common-place from Labour (and Liberal Democrat) spokesmen it is likely to provoke fresh ideological division within the Conservative party unless the leadership sharpens up its assessment of the constitutional effects of the abolition of the pound.

Conclusion

William Hague has not been able to heal the Conservative wounds on Europe nor to construct a policy which would genuinely unite the party. Given the legacy of 1990-7 nor could anyone else, at least among the 1997 election candidates. But Mr Hague has not allowed the impossibility of providing unity to paralyse policy. He has boldly pushed policy in the eurosceptical direction which has become predominant in the wake of Maastricht, and in doing so has more closely aligned the leader, the shadow cabinet, the parliamentary party and the party activists.21 On Europe, as Prime Minister, John Major had power but no authority; in opposition William Hague has growing authority but no power. But with the single currency ruled out until at least after 2002 time is on Mr Hague's side to improve and clarify still further his European policy, especially where ambiguities and political pitfalls remain.

Firstly, Mr Hague must listen to, and engage in, the debate within the Conservative party. In particular In Europe, not run by Europe cannot become an alternative to further policy evolution. The diversity of the debate within the Conservative party since1997 is too complex to be reduced to sound bite slogans. Ken Clarke and Michael Heseltine have aligned with the Prime Minister's Britain in Europe campaign designed to convert public opinion to the cause of the euro. Douglas Hurd has advocated a new EU Treaty to spell out clearly the exact relationship between national and supranational responsibilities. In June 1998 Lord Hurd suggested that, "... the concept of a defining treaty would dismay alike the enthusiasts for a United States of Europe and those fundamentally hostile to European integration and anxious to repatriate powers to the nation. But it might appeal to those, both enthusiasts and sceptics, in order to find a workable way of sustaining and enlarging European Union.22 Peter Lilley, before his dismissal from the shadow cabinet, raised profound questions about the euro which went beyond the purely monetary:

"Our economy has a different cycle from that on the continent. The structural differences are easy to identify. We conduct more of our trade outside the EU than any other member. We are Europe's only oil exporter. We have a much larger equity market than France or Germany. Chancellor Kohl has said "we want the political unification of Europe. If there is no monetary union, there cannot be political union, and vice versa". The simple fact is that there has never been a currency without a government to run it. It is easy to see why this is so. If countries face problems ... they will press for fiscal discipline from their partners.

"Already the EU leaders, including our own Chancellor, are talking of 'eliminating harmful tax competition'. The Austrian Presidency has put it at the top of their agenda for the next six months. Already the Commission says there is a need for 'greater fiscal disbursements at EU level'. Already there is talk of the need for much greater funds to be spent centrally inside any monetary union. It is equally absurd to suggest that Britain will inevitably have to abandon the pound when a large euro zone is established next door. The dollar is a successful single currency covering the 50 states of the USA. Yet next door, Canada, a medium-sized economy , has its own currency. I asked a group of Canadian and American business people if they thought Canada was being left behind because she has not joined in a currency union with the US dollar. They thought I was barking mad."23

In similar vein the then shadow chancellor Francis Maude has argued that Britain's economy will remain cyclically and structurally incompatible with that of the euro area and that any convergence would pull, squeeze and distort the UK economy "... like a woman in the Victorian era submitting herself to be forced into an agonisingly tight corset in order to make her figure conform to the dictates of fashion".24 To Michael Portillo, who remains scrupulously loyal to Mr Hague's position after his by-election victory and elevation to the shadow cabinet, the euro is an instrument of political integration which is ultimately undemocratic. Going beyond Mr Hague's cautious considerations of the politics of monetary union, Mr Portillo has warned that:

"The European Union is entirely made up of member states that are democracies. But the European Union itself is not democratic. Neither the Commission, nor the Council of Ministers nor the European Central Bank is democratically accountable, and neither can they be made so because Europe is not a nation. It follows that the more we transfer decision-making away from the democratic member states to the undemocratic European Union, the less shall we enjoy democratic accountability.

Moving away from democratic control is retrograde in itself, but it is also highly dangerous, because disillusion and grievance provide a breeding ground for nationalism and extremism. In the interests of security, of tolerance and harmony between nations, in the interests of preserving the most valued gain of the post-war period which is democracy, we should turn from the headlong rush towards European political integration, in which the single currency is a decisive step."25

This argument has been made by the Conservative peer Lord Beloff in an article published after his death in March 1999:

"The Government's decision to bring about the entry of Britain into the single curency seems to ignore the fact that continental statesmen have a different set of objectives from those hitherto asserted by British governments, of whatever political complexion.

All the talk about substituting "influence" for sovereignty denotes either a misunderstanding of the European project and its founding treaties, or a hope that the country can be persuaded to abandon centuries of self-government for a minority voice among foreigners. The issues involved in joining the single currency are all too clear - the end of the United Kingdom as an independent country."26

And Lady Thatcher herself reputedly told a private gathering that she favoured a withdrawal from the EU although she publicly endorsed William Hague's policy stance.27 Notwithstanding the euroenthusiasts led by Ken Clarke, such views all point in one direction: that membership of an increasingly federal EU is incompatible with British interests. The debate among Conservatives has already crossed the Rubicon of considering fundamental renegotiation, or outright withdrawal from the EU.28 This is the problem with Mr Hague's In Europe not run by Europe mantra. EU membership already involves being run by Europe as the Single European Act, Maastricht, and Amsterdam all too easily attest. The Maastricht Treaty alone involved over 111 extra instances of qualified majority voting; the Amsterdam Treaty added a further 16. The irony of Mr Hague's slogan is that it originated with the 1997 Conservative election manifesto which promised "...we want to be in Europe but not run by Europe"29 and is one aspect of John Major's legacy which Mr Hague has not abandoned.

Although the 1999 European Parliamentary election appeared superficially to vindicate Mr Hague's slogan, its outcome can also justify a toughening of the Conservative stance. Whilst the pro-Euro Conservative Party led by former MEP John Stevens made no electoral impact, the United Kingdom Independence Party (UKIP) won an impressive 7% of the national vote and obtained, under the party-list system, three seats. If UKIP voters, who are mainly former Conservatives, fail to back Mr Hague at the next general election the Conservative cause - and that of preserving the pound - could be severely damaged. Moving Conservative policy to a position of renegotiation of Britain's relationship with the EU would not exactly steal UKIP's clothes but would be a significant step in that direction. But Mr Hague, in the wake of the European elections, reasserted on BBC's Newsnight that leaving the EU would be disastrous, thus missing an heroic pretext to move on from In Europe not run by Europe to a more intellectually coherent policy. Similarly he suggested in January 2000 that Britain could not contemplate leaving the EU as Poland and Hungary are about to join, thus appearing oblivious to the fact that, should he gain office, it is British not central European interests which he will have to defend. Not so long ago Poland and Hungary were members of the Warsaw Pact but that was never advanced as a reason for Britain to join as well. Current Polish and Hungarian interests may legitimately diverge from British interests and should not hold back the remaking of British foreign and European policy.

Perhaps William Hague has been hitherto intimidated by Labour and Liberal Democrat politicians who claim that renegotiation is merely a codeword for withdrawal. Of course there are circumstances where this would indeed be so; but equally renegotiation could be approached on the same basis as the 1974-5 Labour government to whom withdrawal was an option only if the renegotiation failed. It may also be argued that subsequent treaty revisions, especially Maastricht, entailed a level of innovation and change amounting to renegotiation. Additionally any renegotiation which extended over the first half of a parliament would give sufficient time to assess whether the EU was likely to reform on the basis of free market Anglo-Saxon economics, to abandon its anti-Americanism, and to promote inter-governmentalism over supranationalism as Conrad Black has optimistically speculated.30 If EU reform on such a basis became a reality - rather than empty rhetoric - then renegotiation would prove even easier and smoother than in1974-5.

But in the absence of such a transformation of the EU to reflect British interests and values, renegotiation offers sufficient alternative outcomes - including withdrawal - to permit a cool reassessment of UK interests. Thus far EU membership is an experiment which has only vindicated De Gaulle's veto in 1963 based on irreconcilable differences between Britain and the continent. It may also be argued that Mr Hague's aversion to meaningful renegotiation appears to contradict his Budapest speech in May 1999 in which he called for a less legalistic, enlarged Europe with multiple opt-outs to suit individual country preferences. To be sure withdrawal has to remain an option if renegotiation fails, but the Conservative party could still favour a policy of renegotiation in the expectation that it might succeed as a result of skilful patient diplomacy plus the continental wish to supply British markets. After all it is the UK which has the large trade deficit with the EU since 1973. Moreover as Michael Gove has argued,31 even in the circumstances of withdrawal the continentals would be highly unwilling to erect tariff barriers when they enjoy the benefits of a healthy trade surplus. But even if they did, this would be a price worth paying to escape the CAP, CFP, the £8 billion annual budgetary contribution, the threat of "social model" legislation, and the imposition of the euro. Renegotiation is the logical next step to the diverse à la carte Europe which Mr Hague advocated in Budapest.

Perhaps the greatest irony of the present situation is that it is Mr Hague's success in defending the pound on the grounds of the viability and vibrancy of the UK economy which has inadvertently stimulated the demands for renegotiation (and withdrawal). The arguments for retaining the pound - especially the ranking of the UK economy as the world's 4th largest - are the same arguments for breaking free from the EU strait-jacket to embrace the challenges of globalisation to which the UK economy is so well suited.32 It is not necessary to be a signed-up supporter of European integration to agree with Hugo Young that it is inconsistent and dishonest to seek a middle way of favouring the EU but rejecting the euro.33 The plain fact is that the euro project exemplifies the EU and cannot be disentangled from it.34 The euro stems from the Maastricht Treaty which combined the twin objectives of monetary union and political union. Approving of - or rejecting - one of these objectives is to take the same view of the other. William Hague's European policy has yet to grasp this nettle. He hopes that this middle way will keep on board both Ken Clarke and his allies as well as the much more numerous Eurosceptics.

The peril of this approach is that Mr Hague will repeat - albeit on different political grounds - John Major's equivocation in the run-up to the 1997 general election. Far from weakening his position, the renegotiation option would strengthen Mr Hague by removing the taunt that In Europe not run by Europe is a meaningless piety which has been overtaken by events. After 27 years of EU membership, which have been characterised by acrimony rather than harmony , Britain needs a government to renegotiate a satisfactory relationship with the continent based on free trade not political union. Mrs Thatcher was unable to reach such a destination because of her removal from office; Mr Major was unwilling to undertake such a renegotiation in the wake of the Maastricht Treaty which he tragically prized. Mr Hague now has a golden opportunity to embrace the policy of fundamental renegotiation - with withdrawal an acknowledged option should diplomacy fail. William Hague should seize the opportunity or else his successor as Conservative leader surely will.

References

For contrasting views of Major's European policy see M. Holmes, John Major and Europe: The Failure of a Policy, Bruges Group, 1997, and A. Seldon, John Major: A Political Life, Weidenfeld & Nicolson, 1997.Quoted in, The Times, 04.11.97Speech at INSEAD, Fontainebleau, 19.05.98Ibid.Conservative Central Office Press Statement, 12.05.99Ibid.Speech in Budapest, 13.05.99Ibid.For an analysis of the voting see The Times, 15.06.99Congress for Democracy Speech, 09.07.99Speech to Conservative conference, 07.10.99The Times, 14.10.99Letter to The Times, 12.10.99News of the World article, 26.10.97Op. Cit., 12.05.99Op. Cit., 13.05.99Op. Cit., 09.07.99Financial Times, 01.11.99See Hugo Young, The Guardian, 07.09.99Article in The Daily Telegraph, 30.10.97For further discussion of this theme see M. Holmes (ed.), The Eurosceptical Reader, Macmillan, 1996, ch.8Reported in The Evening Standard, 17.06.98Speech in London, 03.07.98Nick Ridley Memorial Lecture, 03.02.99. However, Mr Maude, in a speech on 25.1.00, went out of his way to leave open the future possibility of embracing the euro.Speech in London, 14.01.98Article in The Times, 03.06.99See The Times, 16.08.99Notably the contributions of John Redwood and Norman Lamont before the 1997 General Election.General Election Manifesto, Conservative Party, 1997.The Daily Telegraph, 02.08 99The Times, 31.08.99For further discussion of this theme see Bill Jamieson, Britain: Free to Choose, Global Britain, 1998The Guardian, 07.01.99See M. Holmes, Franco-German Friendship and the Destination of Federalism, Bruges Group, 1999.